Monkey See, Monkey Don’t: Economic Development as a Whole New Animal

In the economic development world, we’re always trying to grow our economic base. And by that we mean goods and services that we export, not just what we use in our local markets. That might include university services, tourism, and any products that we pack and ship, or regional retail that we steal from our neighbors.

We see economic development in conventional terms, and we seek only to perpetuate the model, adding more of the same to the end of the chain. Another monkey from the barrel, so to speak.

All I really need to know, I learned in Kindergarten. At least as it relates to old-skool economic development.

From the MBA perspective, OPM, or Other People’s Money, usually refers to debt. But it’s really also the traditional view of economic development, the Ponzi scheme that Strong Towns articulates so well. It’s how America has run for the last century, and it isn’t working. We can’t spend our way out of this financial situation by boosting consumer confidence so that we “spend” the most recent stock market up-tick, which we, of course, haven’t sold our stocks to really capture and may just turn into credit card debt in the end. It’s the same sort of way we’ve justified the next sprawling infrastructure spending in the hope of future revenue.

Last month we talked about how sprawl is an economic loser for city governments, and how placemaking is a development catalyst and infrastructure saver. Kaid Benfield’s great article on the NRDC Switchboard this week highlights the Growing Wealthierstudy, which quantifies those arguments.

The neighborhood is the unit of sustainable urbanism. But what if we went back to the notion that the region is the unit of sustainable economic development? Not cutting off the spice trade or China, but in terms of how we think of balancing our city budgets. Attracting and channeling investment rather than jobs? Targeted selectively, across the spectrum of residency, building, employment, the works.

Of course, the region is, at its cellular level, a collection of places — places acting in their own self-interests, competing with each other for diminishing slices of pie — and the monkey-see, monkey-do manner in which so many of them go about their economic development efforts ultimately fails to produce sustainable results at either end of the spectrum.

Thus, the taming of this new animal is paramount. The sooner the better. How are today’s great — or poised to be great — cities and towns getting it done, despite their dire city budget situations? And what does community have to do with it?

Quality of Life
Even in the toughest assessments of what attracts industries to locations and keeps them there, quality of life rates high. We know that people who live and work in places with diverse options for housing, shopping, mobility, and entertainment are generally happier. Happy people tend to be happier employees. Happier employees make more productive employees. And productive employees are highly valued by employers. LA’s Strategic Plan for Econ Development does a good job of laying it out.

AttachmentSoul of the Community, thanks to Knight Foundation and Gallup, concludes that the places where people have the most emotional connection to their community generate the highest rates of GDP growth over time. The usual drivers of safety, leadership, and services were overshadowed by social offerings, openness, and aesthetics – gathering places and a public realm that is alive with pedestrian activity, not auto-oriented throughput.

A Predictable Decision-Making Environment
Communities that have consensus-backed rules and straightforward processes to channel growth and redevelopment can control one of the variables that make firms nervous about capital investments. Predictable environments are at the top of business wish lists.

New Economy Entrepreneurs
Since the overwhelming majority of businesses in the U.S. are those with 10 employees or less, the future of economic development will be in providing a supportive environment for small, entrepreneurial outfits. The most sought-after are the knowledge economy/creative class types. And those folks are urbanists with a vengeance. The latest Kaufman Foundation report does a good job of laying out government strategies for encouraging innovation and entrepreneurial firms.

Don’t just take my word for it

Retail Guru Bob Gibbs

It ain’t just me. I gave a call to urban retail guru Bob Gibbs, who’s releasing a book, The Theory and Practice of Urban Retail, this summer, to talk about how savvy cities are sparking investment through land planning, particularly if last week’s jobs projections from the Fed are accurate. His take, italicized, follows.

In terms of the employment numbers, Bernake could be right about full recovery taking four or five years, but not all sectors will take that long. We’re at an all time high unofficial unemployment, but companies are making record profits off of skeleton crews. There has not been a lot of incentive to hire. Now we’re pushing to overtime, and we’re at a point that large scale hiring again is coming back into the money. You’re starting to see massive hiring in Ohio, Illinois, Indiana, and Pennsylvania for industrial jobs. In some industries, it will be less than five years before we’ll be at a good employment number.

So what can cities do to nurture those recovering industries via planning? How can we keep our existing economic base, while cultivating regional synergies? And how do we do it in a form that we can pay for in the long run?

Regional PlanningCities with strong regional planning have an equal footing to suburbs. Suburban sites tend to be as expensive or not as available as those in the city. On a straight economic sense, if there is strong regional planning, the inner city offers better development options.

Cities without strong regional planning have to compete with suburbs that offer cheaper land. The most important tool in the chest in this case is predictability – both of the entitlement process and that other projects will be built of high quality. Predictability happens with good zoning.

You have this in wealthy suburbs. Except for places like West Palm Beach, where developers made quick deals and built large ugly buildings.

Ease of DevelopmentCities can engage in outright land assembly. And remove the unfair disadvantages of building in the city: building parking garages, utilities. Before the recession, cities could get into the game by giving tax incentives and cash, but now the only thing most can reasonably offer is to make it easier to develop within city limits.

A small town in Georgia has a market for a quarter million square feet of retail, but all of that may be built outside the city because there’s cheaper land, owned by one entity. The city is thinking about aggregating land, dealing with parking constraints, and leveling the playing field.

Montgomery says they had the most job creation of any city in Alabama in 2010, thanks in large part to their aggressive 5-year commitment to placemaking that we discussed last month, in which their SmartCode makes development very predictable. The City is leveraging that with land assembly in the Dexter Avenue developer RFP, which garnered 8 responses that are moving forward with downtown development projects.

WillUnlike Montgomery, the will to develop in cities is often strangely missing. I’m shocked when I go to cities and work with policy makers, they believe that the best way for cities to compete is to go after a minor part of the market share, and to leave the bulk to the suburbs.

For example, Santa Cruz, CA, a beautiful northern California coastal city, has a policy to shunnational retailers, encouraging them to stay out in the suburban mall. One-of-a kind specialty retailers, who are very expensive, are welcome in the city. But not larger hotels, office buildings, large cinemas, Targets.

That’s like saying we want to dominate the auto industry by selling Yugos and let someone else sell Chevys and Fords. Cities need a paradigm shift to be willing to be competitive, and sell whatever it is that people want to buy today, and then mold that into an urban form that matches local character.

Cities assume that multi-screen cinemas have to go by the freeway, and think that the only thing that they should have downtown is a one or two-screen art house. This snowballs into a suburban pressure to develop surrounding restaurants, stores, and residential around the suburban multi-screen cinema. There are innovative and practical ways to put larger format uses within a walkable urban context.

How do you find developers in this economy? How do they finance and build within a tightening credit environment? There is a strong demand for walkable places as seen by their stronger economic performance, but lack of ability to meet that demand in many places.

ImplementationCities have to develop a business plan and actively engage. Old Town Alexandria, Virginia, would rather drive to Tyson’s Corners and shop – it was their conscious decision. This is the story of two King Streets, one in Alexandria and one in Charleston. The Alexandria King Street depends on tourism, depends on residents being able to drive, while the Charleston King Street enjoys local, regional, national, and international draw. The latter is incomparably more authentic.

Mayor Riley of Charleston has established policy to bring in whatever retailers his residents want, as long as they are willing to be in the unique urban form of Charleston character. There is a new Apple Store on King Street in Charleston, which also wanted to open in Old Town Alexandria’s King Street. Because of landlord negotiation issues, Apple chose to locate in Georgetown instead.

Cities can get involved with this sort of program:

1. Establish the will to develop what their residents want to buy

2. Do basic market research to understand what they can support

3. Pick what they want to encourage, then assemble the property and find developers

Cities can buy 6 or 12-month options on large underserved blocks of downtown, and create enough critical mass to make it interesting to developers. Or else hire a leasing company that can articulate the worth of the city, and bring in the tenants.

Developers and real estate development trusts are trying to buy whole cities – or several downtown blocks anyway, and treating it as a shopping center. Such as 3rd Street Santa Monica a few years ago, Lincoln Road in Miami Beach in the ’90′s, and it’s under consideration in Niagara Falls now.

Urban centers, to be sustainable, need to be more than employment and residential centers. Cities lost 77% of retail market share between 1941 and 1960, and are now down to 2-5%. In their heyday, cities had 75-80% of regional retail. Now, cities should shoot for a minimum of 30%, but ideally over 50%.

In Europe, most cities still have over 50% of the market share. But that’s because of heavy-handed legal intervention, which isn’t feasible or palatable in North America. Australia blatantly says no retail outside of the city limits in Melbourne and Sidney, and they’re very rigid about it. I just did a case study for a little town in Scotland that won’t let anyone open a grocery store outside of High Street, unless you can prove that it won’t take market share away from the one on High Street. So it’s not happening.

We need to make it as easy or easier to develop in city centers. Developers made the mistake of thinking that town centers had to be complicated with lots of ornamentation – fountains, clock towers, paving. Santana Row was $400-500/SF to build, requiring $40-50 rents. It’s unsustainable. They didn’t appreciate the value of urbanism. When you’re passing a strip center, you’re passing it at 40-50 MPH, so they have to make them attention getting. When experiencing urbanism on foot, it’s totally a different animal.

New Urbanism got this tag that it was more expensive to build than conventional retail. So most developers think that good urbanism is twice as expensive. Terry Shook, for example, is really good at building town centers that are the same price or less than conventional: $60/SF for office buildings that are really beautiful, while others were paying $120/SF for the shell. All four sides of the building don’t have to be brick, and it doesn’t have to have a slate roof.

If you look at great cities, when they were peaking in the 40’s and 50’s, they were simple. Great placemaking, good squares, places between the buildings were beautiful. Even street trees were rare. The older buildings in Winter Park’s Park Avenue or in Palm Beach’s Worth Avenue in Florida are often 1-story, $60/SF buildings.

Cities can redevelop themselves by going back to the 20’ x 60’ lot, and selling them to small entrepreneurs who can build their own. Instead of waiting for someone who can build a $60 million project, the city can replat to the smaller lots, and sell under $50,000 each, then smaller businesses through sweat equity can build their own stores. Rosemary and part of Seaside were built this way. The only part of Rosemary that got in trouble was the large hotel, which went through a few bankruptcy’s. It’s a very good post-recession model. Instead of taking out a large note and build an Easton Town Center, build the streets and squares, and let the rest occur incrementally, on a small scale, as the market will bear.

Gotcha. Demand needs to be more effectively answered. Form matters. But at some point we’ve got to move beyond consideration of tomorrow’s winners and get down to the practical realities of today’s doers.

Sprawl Repair Maven Galina Tachieva

To that end, I talked with Sprawl Repair maven, Galina Tachieva (also italicized below), about some of the options she sees for sprawl repair providing an economic development catalyst.

Sprawl doesn’t serve the current market. We’re seeing under performance and foreclosures in far-flung suburbs. Currently there’s a big demand for walkable, diverse communities, but they’re in short supply.

The simplest reason is the majority of our projected population growth of 100 million in the next 30 years – baby boomers, echo boomers and ethnic minorities – prefer more urban environments. To accommodate these populations, we’ll need to go into the 2nd and 3rd tier suburbs and make some changes.

Last week’s National Association of Home Builders conference agreed, pointing out the big Gen Y population wants to walk everywhere. According to the WSJ, “One-third are willing to pay for the ability to walk. They don’t want to be in a cookie-cutter type of development. The suburbs will need to evolve to be attractive to Gen Y.” So on top of the 80 million Gen-Y, there are 76 million boomers who want to age in place. The ‘burbs don’t work for either group.

Aging residents will prefer to retire in their suburban homes, in their largest personal investment, per AARP’s Home and Community Preferences of the 45+ Population. If we retrofit nearby amenities, then they can potentially age in place, invest in current neighborhoods instead of moving somewhere. We need to “amenitize” our sprawling landscapes.

Most of the jobs created in the past decades have been in the suburbs, which can be redeveloped into complete communities by adding residential, retail, and civic uses to office parks.

To spark potential economic redevelopment, we have to get creative. Policies, subsidies, and utopian planning created sprawl. To repair it, we’ll have to use policies and subsidies as well. Development is starting to stir again in some places, so we’d better redirect it.

Low hanging fruits are increased density, mixed use, outbuildings, accessory rental units. Suburban zoning is the first thing that has to go.

Where are some of the cities that you are working now that are being proactive about retrofitting suburbs and repairing sprawl?

Mableton in Cobb County, Georgia, a typical suburban community near Atlanta, is writing a form-based code that applies the ideas of the Sprawl Repair Manual and SmartCode Module, with an eye toward multigenerational living and lifelong communities. The most important thing is to ensure the currently high numbers of aging residents are able to stay there.

A new town center is shaped out of existing parking lots, making streets more walkable. We’re allowing single-family housing to expand into front yards. Public spaces are carved from leftover land. The senior facility, instead of being a conventional mega-structure, is fully integrated into the community, with a series of smaller scale buildings that can serve a number of demographics.

The new code will be an economic catalyst because it’s creating a predictable development environment with incentives for faster approval and risk reduction. During the Mableton charrette, people were clear that they want a place where they can walk, as today it is dangerous and auto-centric. If the private sector provides pedestrian environments through new projects, then it will be a win-win situation for everyone. The master plan and the code were sponsored by the County, and hopefully Mableton will become a regional model.

The Sprawl Repair Manual gives elected leaders, citizens, and developers ideas and practical tools for what they can do with existing sprawl. Sprawl types are normative; they’re repetitive. For example, you can pick any mall in Texas, and it’s going to look similar to any mall in Georgia. The solutions for redevelopment of a mall apply across the country.

So let’s go back to jobs. What are some of the outcomes that Mableton is hoping for in their sprawl repair efforts? How do they hope to stabilize and strengthen their economy through adopting a form-based code and master plan that provides sprawl repair and suburban retrofit policies and tools?

Age in place. Attract young residents. Become more competitive to attract and retain jobs, and the investments of the private sector, along with all levels of government incentives. It’s important for cities to understand that greenfield expansion will not bring more tax revenue, because of extensive infrastructure that is required to make greenfields happen. They will need to work with what’s on the ground already – to repair it, to redevelop it, and reuse it.

But places need more ideas of how to do this. New zoning codes are a start, and these codes need to guarantee excellent urbanism. This is how places will compete in the future. The best urbanism will be the winner – in all its forms – walkable neighborhoods, small, quiet towns, or vibrant downtowns. Cities and municipalities need to see the full range of possibilities. Under-performing golf courses can be redeveloped to become amenities for the surrounding bedroom communities. Suburban medical campuses can be transformed into regional urban cores. Commercial strips can be redeveloped into transit boulevards.

Reduce, reuse, recycle, yes my son says this to me constantly. So how are cities funding these sprawl repair initiatives?

It ranges widely from place to place: Tiger Grants, Development Authority Grants, Special Purpose Local Option Sales Tax (SPLOST) as in the case of Mableton. Business Improvement Districts and Tax Increment Financing are other familiar financing methods. But recent bond market movements and city deficits make muni bonds less attractive right now. Public-private partnerships can be considered, and have been successful in past retrofitting efforts.

The Sprawl Repair Manual enumerates some of the already tried strategies but also offers new ideas. For example, cities that want to look at the suburban fringe and do sprawl repair can think of innovative tax credits for specific targets, such as malls, shopping centers and office parks that should be redeveloped so that transit might make sense along certain corridors.

So, while plenty of unanswered questions remain, one thing seems clear: enough with the monkey-see, monkey-do. That chimp’s gone and likely won’t be back. We’re dealing now with a whole new animal, something straight off the island of Dr. Moreau.

Comments

I hope Mableton is a regional model too. I just wouldn’t want to see Mableton be replicated over and over and over. We need some creative experimentation and not just more copying of development techniques from one suburb to another in the same region.

I most definitely agree, Nancy. Galina was referencing the form of the urbanism that she hopes can become a regional model. Going from an auto-centric, single-use environment to one that is pedestrian friendly, with a number of choices for how you might get around, and a mixture of compatible uses within close proximity to each other. For the good of the economy and environment, but also for the use of the more than 50% of North America’s population that doesn’t drive, because they’re too old, too young, not fiscally equipped, or just choose not to. The character of each place, however, should be unique and noticeably different than any other. No replicating. Right on.

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